Two-face would be more appropriate than Joker

All of a sudden, or rather after reports of Banks' PACs and executives switching their donations to the elephant after the donkey's teat turned sour, Obama comes out as a supporter of bonuses and a champion of capitalism, telling Democrats that "We’ve got to be the party of business, small business and large business.”

clipped from www.bloomberg.com President Barack Obama speaking in an interview, said in response to a question that while [Dimon's bonus of] $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.” Dimon, 53, led New York-based JPMorgan, the second-biggest U.S. bank, to a profit during each quarter of the financial crisis. Blankfein, 55, was at the helm when New York-based Goldman’s shares doubled last year as profit soared to a record high. [Sounds like they didn't just make the Series: Dimon won the Golden Glove, and Blankfein got the Cy Young trophy too.] “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free-market system.” President Barack Obama called bank bonuses “obscene” at least twice this year. Obama is “trying to walk a very fine line,” said Mark Borges, a compensation consultant “He wants to represent popular anger at the bailout and Wall Street pay, while at the same time trying not to alienate these guys, who he needs [to give him the "obscene" amounts of money that he relied on to win the 2008 election.]

A Darling Buffoon

Alistair Darling must have slept through his maths classes in elementary school. If you want to get tax revenue from the rich, but also command firms to curb bonus payments then where are you going to get that extra money from?
At least he is being completely "Frank" about his socialist, Robbin' Hood, ideals. Maybe Labour should just drop the pretense and rename themselves the Pathetic Proletariat Party.

clipped from www.bloomberg.com Chancellor of the Exchequer Alistair Darling, targeting what he calls “greed and recklessness” in Britain’s financial system, asked banks to curtail bonuses and said the rich will pay more in tax. “It is right that those who earn the most should shoulder the biggest burden.” “We will introduce legislation to end the reckless culture that puts short-term profits over long term success. It will mean an end to automatic bank bonuses year after year.” Darling said he has raised tax rates and eliminated relief for pension contributions for the rich. This week, Darling will [ask bank heads of remuneration] that they reduce bonus payments at the ahead of a change in the law aimed at formalizing curbs on pay. “The government’s implicit presentation of excessive remuneration as the cause of the crisis, and the banking bill as a silver bullet that will kill off financial excesses, is singularly unconvincing,” said Simon Morris, a partner at law firm CMS Cameron McKenna.

Let's drop the pretense and the trousers.

Apparently the firms that were able to quickly repay the TARP money, with 23% interest to the taxpayers, and immediately turn a profit are not to be praised. Indeed, they are villains of the highest order. Their crime is that they dared to succeed without the government's help and oversight. In fact, those unbridled rapscallions couldn't wait to shake Geithner off the saddle and spit Obama's bit from their foaming mouths.
Naturally, Obama is upset that there's an important sector of the economy he doesn't have full control over - so it's important we quickly pass reform to nationalize everyone, regardless of their financial condition. At least he's finally being forthright about his intentions.

clipped from www.pbs.org JIM LEHRER: Speaking of the economy, do you share the concern and growing anger by some people over the fact that these big Wall Street banks are suddenly making these huge profits while the unemployment rate continues to go up, foreclosures continue to rise, all kinds of other bad things are happening to individual Americans on the economy. PRESIDENT OBAMA: The problem that I've seen ... is you don't get a sense that folks on Wall Street feel any remorse for having taken all these risks; you don't get a sense that there's been a change of culture and behavior as a consequence of what has happened. Now, there are some companies, like Goldman Sachs, that have paid the money back and that means that we don't have the same kind of levers on them that we might have. And that's why I think it's important to pass this broader financial regulatory reform package. Make no bones about it, I am pushing hard.

P.S. If you don't want firms to take irresponsible risks, then maybe you shouldn't let lobbyists tattoo "2Big2Fail" on the back of every lawmaker's skull.

You can't be half pregnant

Why would the government want to convert their high-dividend yielding (and theoretically profitable, as they're financed with low-yield debt) preferred nonvoting shares in the banks into voting common stock?
At least Goldman wised up and is pulling out of this TRAP as quickly as they can. I can only foolishly hope that the rest of the banks who were forced to accept government money by Paulson and Bernanke will follow suit quickly, lest they become just another foot solider of the government forced into sodomizing itself at the whim of deranged puppetmasters who refuse to learn from history (or even yesterday's news) and care only about elevating their populist pulpit, even if they have to build it with soiled paper bricks and toxic mortar (see the Fannie Mae article from yeserday).

clipped from www.reuters.com Policymakers are considering an idea that the government change its existing holdings in the banks, which have taken the form of preferred shares -- non-voting stock that carries a fixed dividend -- into convertible preferred shares that could be converted into common stock, the paper said. Under this proposal, the shares would automatically convert into common equity if there was a decline in the bank's health, as measured by its tangible equity ratio, for example, the paper reported. The Obama administration is considering an expansion of the Federal Reserve's consumer-lending facility, known as the Term Asset-Backed-Securities Loan Facility (TALF) that could potentially buy up toxic assets clogging the system, the Wall Street Journal said, citing people familiar with the plans.

First Socialist National Bank

I could care less about executive compensation, and quite frankly most CEOs should be taken out back and shot by the shareholders for selling their companies out to the government by accepting TARP money, especially when not every bank needed it – but every big bank was required to take it by Paulson and Bernanke on that fateful weekend when capitalism got its first fatal stab in the back.

Here’s the thing that absolutely nobody in Washington or Main Street understands: virtually all of those bonuses were paid to the employees who earned them because of their performance. The CEOs did not take a dime (nor should they have done anything but write a suicide note). While it’s great to rouse the peons with claims that banks paid employees millions “just for showing up” and “pushing paper around” that has never been the case. It’s true that an employee who consistently produced for many years, but then had an off year, would still be paid a [much smaller] bonus – because the bank understood correctly that it’s likely that this employee will generate revenue again, and did not want him to quit. There are virtually no cases, however, where an employee who routinely lost money for the bank was retained, let alone paid a bonus (case in point – almost everyone on mortgage desks was let go way before anyone started talking about a bank bailout). Those who make the big bucks have quotas, if you fail to meet them for 2 or 3 years you’re out on your ass. This is how this business works.

Furthermore, and most importantly, a bonus is a percentage of revenue that you brought the bank. That is – these people are getting a fraction of what they directly contributed to the bank’s bottom line. The best traders and their teams can leave and make money elsewhere, and in fact there has been a massive outpouring of all the best talent from sell-side shops in 2008. This will, by grade school logic, result in far greater losses for the banks in the future. On the other hand, retaining an employee who on average brings in $10mm/year revenue for $2mm/year bonus isn’t a difficult choice in a rational world. Arbitrarily limiting that person’s comp just because some secretary in Nebraska who can't pay her mortgage and has 8 kids doesn’t make that much in her lifetime is a tenet of socialism.People in a capitalist society get paid based on what they earn, not based on what they need, or what the government thinks they should earn.

clipped from www.bloomberg.com President Barack Obama called bonus payouts at banks getting rescue funds “shameful” as he and Treasury Secretary Timothy Geithner announced the government will require financial companies getting aid in the future to cap compensation of top officials at $500,000 a year. A New York state comptroller report that $18.4 billion in bonuses were paid out to Wall Street executives and employees as the U.S. sank into a recession further inflamed Americans. “For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it’s a bad strategy, and I will not tolerate it as president,” Obama said. On Wall Street, there is concern that compensation curbs would hinder a company’s ability to attract top-notch employees, and that would lead to a talent drain, Meredith Whitney, an analyst at Oppenheimer & Co., said on Bloomberg Television. “If you cap compensation, the best and the brightest are still going to figure out a way to make money and it may not be on Wall Street, when those minds are needed most,” Whitney said. William Cohan, a former investment banker at Lazard Ltd. and JPMorgan and author of “The Last Tycoons” about Lazard, disputed that notion.“What do they do? They push paper around,” Cohan said, “Where else can you get paid $500,000 to do that?” Senator Claire McCaskill, said small-business owners are calling the bonuses “obscene” and other lawmakers say they are getting angry calls and mail from constituents on the subject. McCaskill said today the Obama plan is in line with what lawmakers are seeking in an effort to change “the arrogant, greedy culture that created this mess in the first place.”

Did everyone forget what Ken Lewis said (including Ken Lewis)?

With all the talk of BAC buying LEH, I have to wonder if everyone forgot what BofA's CEO said less than a year ago, shortly before all but dismantling all of BofA's IB infrastructure.

clipped from blogs.wsj.com Here is what Lewis, the CEO of Bank of America, had to say on the company’s conference call to discuss its third-quarter results about an acquisition or joint-venture deal to salvage the dismal performance at its investment-banking unit (where profit fell 93% to $100 million). “I never say never, but I’ve had all the fun I can stand in investment banking at the moment.” So much for the hopes of some investors that the company will make an acquisition (of a Bear Stearns, or a Lehman Brothers or UBS’s Wall Street unit) to once and for all get into the top tier of investment banks — and perhaps acquire some adult supervision for its trading operation along the way.

Jimmie takes it from Jamie

So everyone heard the word that Jimmy Cayne sold virtually all his stock at $10.84 today, which most people took to mean he considers that $10 is the most that Bear can expect to get, and just wanted to arb the 84 cents before it was too late. The reality is much more likely that Jimmy was indeed trying to fluff up new suitors, as was rumored, but Jamie Dimon stepped in to put a stop to that - promising Cayne a nice private payout in cash and/or JPM stock later, perhaps even a couple years after the deal gets cemented (like shoes on all the Bear brokers who are getting axed). To guarantee this Jimmy merely had to immediately sell his stake in the firm, thereby sending an all too clear and irrevocable signal to other shareholders to shut the fuck up and sign on the dotted line.

Jimmy the Joint

Brilliant article written by Warren Spector in the WSJ.

Some choice bits:

The fund trouble was a shock for Bear, which was known as one of the Street's savviest risk managers. For years the firm relied on a system of "ferrets," or managers who monitored trades, to spot problems.

Ferrets? I think you meant Weasels…

Investment-firm chief Alexandra Lebenthal brought her 11-year-old son to visit Bear a few years back. She says she introduced him to Mr. Cayne, who pulled her aside and said, "That kid's got a rotten handshake. He's going nowhere in life."

Billy Bob Thornton is Jimmy Cayne in Dirty Bear – coming to a theater near you this Christmas!

Attendees say Mr. Cayne has sometimes smoked marijuana at the end of the day during bridge tournaments.

After a day of bridge at a Doubletree hotel in Memphis, in 2004, Mr. Cayne invited a fellow player and a woman to smoke pot with him, according to someone who was there, and led the two to a lobby men's room where he intended to light up. The other player declined, says the person who was there, but the woman followed Mr. Cayne inside and shared a joint, to the amusement of a passerby.

Asked more generally whether he smoked pot during bridge tournaments or on other occasions, Mr. Cayne said he would respond only "to a specific allegation," not to general questions.

Girls were hot wearing less than bikinis
Bear investors driving little Minis
Jealous 'cause I'm out getting mine
Jay with a joint and Spector with Subprime

Even when he wasn't there in person, Mr. Cayne was hands-on, say other associates. Mortgage-division head Tom Marano, who temporarily left his post over the summer to help stabilize the two flailing funds in the firm's asset-management division, says Mr. Cayne offered some helpful advice on handling irascible creditors during a critical period in July. Mr. Marano says the CEO told him in a phone call to "keep your Irish down," or cool his temper and try to negotiate calmly. (Mr. Marano is of Irish and Italian descent.)

Guess Jimmy can blame the whole crisis on the “Luck of the Irish”

On July 12, chatting with visitors over lunch, Mr. Cayne seemed less interested in discussing the markets than in talking about a breakfast-cereal allergy and his stash of unlabeled Cuban cigars.

Damn, Jimmy-Jay just str8 busted up his private stash. Obviously blazing with the analysts is a brilliant move to help Bear get favorable coverage again. What's that, you got some munchies? Here - just eat some of Bear's commercial paper.

Friends of Mr. Cayne say he is troubled by the summer's events and concerned about his legacy.

Yeah, if I just lost 61% YoY in income I’d be “troubled” too. I wouldn't be concerned about his legacy (say what?) - Bear's being sold to China, anyways.
You can’t make this ish up. Dirty Panda Bear in da house, suckas.

Ignorance is a Piss Poor Substitute for Intellect

I wrote a comment on this article about the II's 40th Gala in NYC in response to the three idiots who I quote below.

• 9. October 23rd, 2007 10:50 am

  “Is this where we complain about people who have money?”

  No, this should be a post where we complain about HOW people make their money. I would argue that money in and of itself isn’t anything to abhor. How one makes their money is another issue. I would argue that the predation of this particular group of people, and in turn the corporate entities and attitudes they have spawned, on both our society and industry has been at a net cost to our society. Their half-hearted philanthropic attempts to achieve some form of personal reconciliation for their lifetimes of plundering society’s coffer won’t do a thing to reverse the ills we have borne as a result of their greed.

  — Posted by John

• 10. October 23rd, 2007 11:00 am

  All these people are from Virtual Money Making Field, just CON-ARTISTS. We must not complain about people who have money, but, look into how they got it? American Capitalists are joining the Chinese Communist Leaders to suck the blood of 1.2 billion Chinese (sorry deduct 1 Million Communist Party Members from 1.2 Billion). In the process, they will wipe out Middle Class from America. India with all its faults have democracy and exploitative power could not be concentrated at the top, like that in China.

  — Posted by Shyamal Ganguly

• 11. October 23rd, 2007 11:26 am

  Now, if we could just focus all that ambition and drive on something socially responsible, like sustainable energy sources and clean water, that might provide a real future for all on this planet - for all their so-called success, these people truly have simply exploited the rules of accounting and tax laws to create an illusion of prosperity.

  — Posted by Dan Kiely

My Response to the Above:
Looking in from the window frosted by what you consider unbiased media must be fun, John, Shyamal and Dan?

Private Equity takes broken down, misvalued, companies and fixes them for the benefit of everyone involved. The people who get laid off in these deals are the excess fat that needs to be trimmed to make the firm lean and profitable again. Nobody in America has a guaranteed job - if you want that please go live in a Communist country (like I have for 11 years) and you'll quickly understand how wonderful it is to have the chance to excel based on your own merit.

Anyone who thinks that the only way people in finance make money is by "exploiting" accounting and tax laws should at least try to take a Finance 101 class before running their mouth. That statement is simply absurd and shows nothing short of a complete lack of understanding.

Regarding "half-hearted philanthropic attempts", which certainly shows how little facts you know (or care to admit to), these people could care less about your approval of their actions and don't feel the need to redeem themselves in front of anyone. They got to where they are through hard work, quick wit and sharp intellect. Certainly much philanthropy is done for superficial reasons (by every kind of wealthy individual across the world), but do you really think that all these people care about is another blurb in the paper or their name on yet another building? No - they genuinely want to give back to the very rabid mouth that wants to do nothing but bite their hand at every opportunity.

Finally, and most importantly, don't forget who the biggest investors in Private Equity and Hedge Funds are - institutions like college endowments and pension funds. Yes - blue collar working class Americans and students who are unable to pay for college on their own benefit greatly from private equity and hedge funds doing well. As for charging 2&20% - part of capitalism is having a free market, and nobody lucky enough to have invested in RenTech is complaining about being charged 40% with the returns they're getting.

These people are neither angels nor demons - they are simply more wealthy than you and made their money in ways that you choose not to understand except as how they are relayed to you by scapegoating sensationalist (and just as ignorant) media outlets.

clipped from dealbook.blogs.nytimes.com Institutional Investor, the first trade magazine to cover Wall Street, celebrated its 40th birthday Monday by throwing itself a party at the American Museum of Natural History in Manhattan. Masters of the Universe from around the nation and the world flew in for the event. The highlight of the evening was when Mr. Kravis jokingly apologized to his peers in the audience for charging his investors 20 percent of profits in 1976, which became a benchmark for private equity and hedge funds. He said that, at the time, there was no going rate, so he and his partners decided 20 percent was fair. In retrospect, he said with a laugh, “You could have gotten 25 percent.” Then Mr. Simons of Renaissance took the stage. He famously takes more than 40 percent of all profits from his fund investors. “We blissfully ignored” the benchmark Mr. Kravis created, he said.

No Shit, eBay!

I recall trying to explain to a Lazard monkey during my interview there why this deal was going to kill eBay over 2 years ago. Fortunately for me the dumb fuck insisted that according to his model this deal would pay out in 5 years, and I didn't get my job because I told him he was wrong. Good thing - Lazard kills its analysts. Literally (I was going to link to the article about the guy who died @ Lazard pulling a week of all-nighters but couldn't find it). Incidentally, since Morgan and Merrill were the bankers why did he build a valuation? Guess Lazard didn't make the cut on that one. Whoops.

The best part of this article however is the nugget (like the one you find in the toilet after plowing through a porterhouse) from Aaron Kessler of "we pretend we're not middle market" bank Piper Jaffray. Yeah, Aaron - Skype should really look at diversifying into search engines. It's an obviously untapped market, and one Skype could capitalize on with all their experience in VoIP. I shouldn't be surprised, though. Any "research analyst" who can pick stocks with any semblance of accuracy is snapped up by buy-side shops and gets paid at least quadruple what they'd make on the sell-side. So if you've been at public sell-side research for longer than 2 years you're a failure at life. I'd tell you to jump out the window, but most banks cleverly place their research analysts on the lower floors.

clipped from business.timesonline.co.uk EBay, the internet auction site, admitted yesterday that it had overpaid hugely for Skype. EBay bought Skype in 2005 for $2.6 billion. Yesterday it warned shareholders that it would have to take an impairment charge of $900 million (£450 million) because it had valued the group too highly two years ago. Niklas Zennstrom, Skype’s founder, would step down as chief executive of Skype to become nonexecutive chairman. The online auctioneer has cut bonuses due to Mr Zennstrom and others by 60 percent because it was so disappointed by Skype’s performance. It would pay only $530 million in cash to the Skype founders in the only and last payment of its kind. An eBay spokesman said: “Skype has not performed as well as we would have hoped. But we still believe Skype to be an extremely valuable asset.” Aaron Kessler, an analyst at Piper Jaffray, the US investment bank, said: “They haven’t really figured out a way to monetise their clients – they haven’t introduced new services such as search engines.”

The Value of Money

Had a discussion with some intellectual friends today about the joys and burdens of money, and how as it relates to a fulfilling life of happiness, and whether the latter can be achieved with the former if one makes its acquisition his central pursuit. Here is a summary of my thoughts on the matter for all those curious:

1. Your family and genuine relationships (that is, those which would withstand any material stress test) matter the most in life no matter who you are or what's in your wallet.
2. “Friends” who hang around you because of your socioeconomic status are leeches and should be treated as such - in the medical sense - that is, you should only allow them close to you if they serve a purpose and then immediately discard them.
   
3. Money is an enabler of greater enjoyment of our immaterial possessions. It is perfectly rational to live in the moment instead of only being focused on working to make your "tomorrow" better since that day, as my friend pointed out, will never come if you set no clear goals and become caught up in a neverending race to acquire ever greater wealth. What if living in the moment, however, involves chartering a jet to Paris for a weekend with the woman you love? What if it involves buying a work of art you’ve always admired or populating your library with first editions? Do you need these things to be happy? Of course not. All man needs (loosely based on Maslow's Hierarchy) is physical nourishment, intellectual stimulation and love.
4. Thus I agree that it is worthless to chase money aimlessly (and especially if you must sacrifice your relationships, your youth or your health) but if you truly love what you do and by luck it happens that this profession makes money then you shouldn’t feel like your life lacks meaning just because you’re not engaged in what society deems to be more creative or nobler pursuits. A person who derives his greatest joy from structuring derivatives should not try to be a poet, painter or doctor. Doing what's against your nature is never right.
5. A litmus test I often ask myself is "Would I still do this job for free and if I just won the lottery?"
   
6. I’ve often wondered myself what other careers I could’ve pursued, but the reality is we have many talents and you won’t be able to explore and grow them all fully. Thus you have to compromise and pick your path, and in doing so choose the one that you will enjoy the most, not the one that will lead you to the greatest riches, fame or power. I don’t know many people who achieved greatness in finance or otherwise who did not love what they did. You need passion to excel.

Goldman Embarrasses Fashionistas with Smarts and Street Style

Goldman Sachs won a fancy fashionista quiz bowl after several analysts pulled consecutive weekend all nighters prepping the GS team on every manner of trivia. An Analyst who worked on the project speaking on condition of anonymity, as it's close to bonus, remarks [with a sigh] "At least this time my work was used for something. Usually the weekend pitchbooks are just coasters for the MD's Monday coffee. Naturally, they promised us that we would get to come, but inevitably "found out" that the team was at capacity right before they left for the event, but not before they made me do another turn - even internal books need to show Goldman's commitment to quality lest some bum find them in the dumpster and think less of us."

After extensive "wardrobe consultation" spanning a month the team decided to kick it old school with blue and white shirts (after all, Goldman Sachs isn't about being "wild and crazy and different"). The subtle deviations from regular banker attire is that the blue shirt was tight enough to bust at the seams, teasing the paparazzi with the possibility of a strategic wardrobe malfunction (but an undershirt was worn to prevent the world from actually seeing the hairy underbelly of banking), while the white shirt had two buttons undone and was slightly untucked, showing a Devil-may-care "we don't care that our Global Alpha underperformed every major fund on the street" attitude.
The real winners, however, are the first years at Deutsche Bank whose team won a "vast" supply of sexy lingerie. It's the closest any of them have gotten to a woman since the drunken debauchery that is investment banking training.

clipped from nymag.com Great triumph mixed with crushing defeat the other night as highly competitive people with lots of disposable income gathered at the Gramercy Park Hotel Private Roof Club for a fancy quiz night socialites, models, fashion designers, and, of course, investment bankers, who felt a little out of place. "We're investment-bank nerds, so we spent pretty much a month planning our outfits," said a member of the Goldman Sachs team. "We had wardrobe consultations on conference calls." Corporations from Valentino to Bloomberg sponsored teams, which then went from room to room, debating the questions in each. Goldman, surprising no one in the room, took home the grand prize. Other teams won various smaller prizes; Deutsche Bank, for example, won a vast supply of Agent Provocateur lingerie. Are you good enough to win a trip to a model's villa — or at least some fancy underwear? Here are the questions. (And the answers.)

Persian Valley Girls at Carlyle

It's amazing how some people manage to squeeze through the cracks (or have rich daddies who hook them up). NY Mag just profiled Natasha Mitra who is an associate at Carlyle (after a stint at the Dirty Bear).

A couple points:
1. That bag is so hideous that any socialite can just look at it to induce vomiting when she needs to purge. Your personal shopper was clearly trying to pawn you a shitty sample from last-last season's collection. Big was in maybe 3 years ago? And this thing is big enough to fit your nose (well, almost).
2. Clearly you spent all that money on the bag and wound up with no cash to get your nappy ass (it's OK to say because she's only brown) hair done so it didn't look like a used mop.
3. Your choice of Brands - for someone who works for a consumer group you clearly have no class and still go for the big logo names. Here's a hint, sweetheart - a real quality piece doesn't need to advertise its price with a big label because it's self-evident. Jigga said it best: "My chick burn it down Bergdorf's/Comin' back with Birkin bags/Your chick is like, "What type of purse is that?"".
4. Your sunglasses, to quote South Park are those "only Persians would like." Which I guess does make them "wild and crazy and different" - sort of like a rabid monkey in a clown suit.

clipped from nymag.com How old are you? I’m 26. What do you do for a living? I work in private equity. I love the sector that I work in, which is the consumer and retail group. It’s an area that I’m passionate about. I love to consume. Consuming is my specialty. Such big accessories! My bag was a really special purchase. I work with this woman at Louis Vuitton—she picks things out for me, sends pictures, and tells me to pick what I like. She called one day and was like, “I picked a bag for you, and I’m sending it to your house because I know you’re going to love it.” I think it’s called the Stratus. Was the bag expensive? Yes—about $3,500. I guess a lot of craftsmanship goes into it. Accessories for me are the key. I have about twenty bags, and I don’t know how many shoes. But they’re Vuitton, they’re Versace, they’re Gucci, and they’re Dior. And your sunglasses? They’re D&G. I was really excited to find them. They’re wild and crazy and different.

Bye Bye Banking!

If I haven't made any posts in a while it is because I have been drunk with joy. And alcohol. Last Friday the 29th I resigned from my role as Investment Banking Analyst to pursue my dream of controlling the world's financial markets (the key to success is having modest, easily-achievable, goals). Here's how the Arbitrageur got a new job (and put some substance behind his name):

About a month ago I applied for a Portfolio Analyst role through craigslist to work for a "new quantitative hedge fund platform, a strategic growth initiative funded and seeded by []. This is a small company centered around quantitative fixed income strategies with an entrepreneurial work environment that is well suited for focused, energetic, self-motivated and flexible top investment talent." Although the job required 2-3 years of buy-side experience, in my desperation to get out of my shoddy sinking dinghy of a bank I applied anyways, hoping that my mix of derivatives and programming knowledge and the intellectual tenacity of an Oxford educated pit bull would carry me through.

A couple days later I got an email from the president of the fund, asking me to come in for an interview. Thus began a quest that would consist of 7 hours worth of interviews, masked as so many doctor's appointments that my MDs must have thought I have become either terminally ill, a hypochondriac, or both. The questions asked of me by the president and his elite team of quant Ph.Ds (I'm the only person employed by the fund without one) ranged from derivative modeling to programming to econometrics and math. Quite frankly, I'm surprised that I made it out alive. My black belt in bullshit isn't exactly applicable to questions such as "write an SQL program that calculates the aggregate return and risk of a portfolio." I guess you never know how far you can stretch yourself until put into the "seat of heat", and that's exactly why I can't wait to start my new job. My mind will be honed to have the all the speed and litheness of a gymnast on a racehorse.

Before I begin climbing the steep and shaky ladder to the top, however, I am taking two weeks off to shed my banker skin and come to work ready to be reborn. Expect a recap when I return from my world tour of debauchery. Till then, I remain your arrogant Aribtrageur.

Banker Break: Engrish.com

We bankers are often in a desolate mood, so I have found several good pick-me-ups to lighten the mood. I will start introducing these whenever I feel like I should post something, but can't think of any actual content.

So before you go trying to fashion a noose out of spiral binding how about laughing at the Japanese over at www.engrish.com?

Turnover Ain't Tasty

The dubious MD from the last post has resigned today. He went from our shitty middle-market bank to a marginally less shitty bank. Other departures in the past 2 weeks: The Head of Banking, 2 Analysts and 2 Associates. Don't you love bonus season? (I'm not talking to you, Mr. Bulge Bracket Bitch, go point your gold-tipped cane elsewhere. This is Middle Market Mafia turf, and what we lack in deal volume we more than make up for in angst.)
Needless to say I am now the only analyst in the SF office, so I hope more senior guys leave. Then I will have no work, as it stands, it's 2AM and my model still looks more like Hillary Duff than Hillary Swank.
In other words:
Fat, Clumsy and Stoopid-Lookin:

...instead of Slim, Sexy and Classy:

















(and might I add that that's quite the OAS, Ms. Swank. You could boost my alpha any day.)

How Not To Close A Deal

The following is a truncated interpretation of the conference call with the CFO of a prospective bidder for a sell-side deal that led to the engagement being terminated:

Big Bidder: Hi there. We think your counteroffer is a joke. We have $70M in revenues and you have [dramatic pause] three. Basically, our valuation is right and yours is wrong. We’re throwing you a bone, so be a good little poodle and lap it up. Our original offer is final.
Our MD: Well actually our valuations are very close. We just need a little bit more to make the client happy.
BB: I’m sorry, did I stutter?
MD: Well, we’ve been very flexible and can bend backwards a little more – but if we are going to stick our head up our own ass you have to at least bend down to touch your toes.
BB: [long pause]
MD: Hello, are you there?
BB: Yeah… Umm, sorry – I just thought that I made myself quite clear.
MD: [beats off a dead horse for another 3 minutes]
BB: You know, we do have other targets that are cheaper and more exciting. Tell that to your client
MD: I’m not going to say that. That’s too negative. I’ll tell them something positive instead.
BB: (another pause)
MD: That’s cool. Just don’t say anything if you agree.
BB: No, I’ll say something. The deal is off. [Trump Style] You’re fired.

How every analyst feels after being asked to flip a 100-page CIM by tomorrow morning...

The Client Is Never Right

I spent hours this Sunday toiling over my beautiful model, unsure as to why it wasn’t balancing. I checked all the numbers, examined every formula and audited every assumption – yet still it was off. Moreover, the difference was but a measly $291,000. That won’t even buy you a half-decent yacht anymore. Why is my extremely valuable time being spent trying to find such a trivial amount, I pondered. After all, I could be lounging out by the pool in the refreshingly nippy 65 degree weather, hoping that the chilly gusts of wind will have the desired effect on the bust of the nubile young fox stretched out across from me.

Instead, there I was: buried under a pile of marked up financials, my only sources of sustenance being Cheddar Cheez-its and a bottle of Knob Creek. Bleakness all around me, save for the pale glow radiating from the monitor. If an artist is to be qualified by how much he suffered for his work then I was fuckin’ Michelangelo. The afternoon turned to night and the bottle of Knob, much like me, turned into an empty vessel, devoid of all utility. I threw the bottle into the trash and myself into bed.

This morning, feeling equal parts refreshed and hungover, I once again attacked the model with the resolve of a snared pitbull. After several more hours of futility I finally found the root of all evil. It was hidden, quite literally, in one of the 50 columns in one of the 25 worksheets in the client’s Excel financials. Turns out that when putting together their quarterly balance sheet the client decided, for no apparent reason, to omit one of the line items and thought it wasn’t worth footnoting. Now I understand why they have metal detectors in most office buildings. Then again, it doesn't seem like these guys have much of a brain to blow out anyways.

In the next issue: How to turn a $1M cow with negative cash flows into a $70M sexy beast.

I Write CIMs Not Tragedies

Most fresh analysts shudder at the thought of being staffed on their first Confidential Information Memorandum, or CIM. A 40-80 page document that will be shown to all the potential investors/buyers of a firm, it has to look perfect and sell that little piece of shit for at least twice its “true” value (of course all truth is arbitrary in banking). Not to worry, however, the CIM is one of the easiest things you’ll ever do – but do it right and everyone will think you’ve toiled endless days and nights. Creating the illusion of long hours and hard work is the most important skill of a good analyst.

Rarely will you actually have to write anything in banking. Most documents (like sales memos and engagement letters) are fully templated and so shrouded in legalese that only a legal weasel could comprehend them anyways. At first glance CIMs appear different, however. They’re meant to sell the company and must therefore be understood by any potential buyer who, we are to assume, has no legal or finance experience. Does this mean you must actually write up a coherent thesis on why this company is such a great buy? Hell no! You weren’t hired as an analyst to think. Fine, you say, but how do I fill up all these pages then?

Elementary, my dear Watson. Unlike your reputable academic alma mater the bank is amoral and encourages plagiarism. First, ask the company for all of their marketing, financial and business documents. Next, assuming the company is private, find the offering memorandum of a comparable public company on EDGAR and steal their industry overview and risk sections. Now you have all the building blocks to create your Tower of Babel.

You must copy and paste and arrange all the different pieces of different documents into your CIM’s sections, which your VP/Associate should have already defined. Remember to make it look pretty and throw in lots of pictures. Investors, like fish, have short attention spans and need shiny lures to be hooked. If you’ve ever had the “privilege” of meeting with a client for a pitch you already know that 70-80% of the book you’ve spent all of last night making is never even discussed. The CIM is no different. Investors will only read the executive summary, which is a concise copy-and-pasted version of the full CIM, look at the pictures and flip the financials. That’s enough for them to decide if they want to proceed further, and as you must know by now you only need to do the minimum work necessary to get the investor hard about your client.

That’s all there is to it. Your value-add is essentially reformatting and partially rewriting a bunch of garbage and making it look like a legitimate business operation. One final note, remember to look busy during the day and have Outlook automatically send the email with the CIM attached at 4:00am. Virtual facetime is a wonderful thing.